Epic's Fortnite Mishaps Come Back to Bite All of Us
The Epic layoffs completely reframe and reaffirm recent moves:
- Settling with Google + Apple resolution (mobile needs to win: see Roblox)
- Adding MTX to islands
- V-Bucks price increases (regional, inflation adjustment, but uncommon)
If Tim is taking this company public (Disney acquisition is the failsafe), he needs a better balance sheet. IPOs are about showing explosive growth, not shrinking margins. The press release also suggests they've been running at a loss, which would be something else if true.
Remember, this also follows layoffs in September 2023, which amounted to 870 jobs, or around 16% of its workforce. We can infer from that announcement that this is around 20% of the current workforce, or a fifth of the company, potentially even a fourth.
The press release mentions other savings that will amount to $500m+ on the P&L, which is a number specifically mentioned, so investors take note. Even if half of that $500m came from the 1,000-employee headcount reduction, that would imply $250k per employee. Not cheap!
Especially confusing, since so much of the 2018 headcount explosion was about setting up and finding talent outside Cary, North Carolina, with a strong European operation. Like Scopely's building out of Barcelona to prepare for an IPO that never happened, I wonder if Epic would have been better off building a European-based HQ2.
At the center of all this is something I've talked about frequently: it took Roblox over a decade to build what it has today. The lack of allowing islands to monetize means the UGC flywheel, in which creator revenue attracts more creators, which attracts content, which attracts players, which attracts wallets, which attracts more revenue, has never been able to launch. Only just this January have they even started on this monumental task.
